A conversation with Decarb Connect: 3 key takeaways

From policy and carbon markets to CCUS and carbon removal, the carbon management space is essential driving decarbonisation, but what direction is it taking in 2026?  

Peter Albin, Wood Mackenzie’s Senior Research Analyst for Carbon Markets and Stephanie Chiang, our Senior Research Analyst for CCUS, recently appeared on a podcast with Decarb Connect. Read on for three key takeaways from that conversation, then listen to the full podcast.

Behind the headlines, the future looks positive for carbon markets  

Analysing carbon markets in 2025 underscores the need to look past sensationalist headlines to discern the long-term impact and trends. An early signal of upcoming turbulence came from US, with its withdrawal from the Paris Agreement being representative of shifting policy. Significant delays followed elsewhere, to the European Union’s second Emissions Trading System (ETS2) as well as to the International Maritime Organization’s net zero framework. Meanwhile, at the corporate level, backsliding on net zero commitments created headlines, while the dilution of the scope of EU sustainability regulations presented a headwind for progress. 

Beyond this volatility however, many positive undercurrents remain. COP30 confirmed that international carbon markets are ready to move forward and global compliance carbon pricing emissions coverage expanded to a new high. More compliance regimes will launch in 2026 and many Governments are passing regulations to facilitate an increased presence across both compliance and carbon offset markets. Meanwhile, following a huge annual record, offtake agreements are set to continue driving carbon removal projects forward, particularly in areas of accommodative government policy and support.  

Mixed policy signals in the US were destabilising to CCUS development, while the sector continues to scale elsewhere  

The carbon capture, utilisation and storage (CCUS) industry is still in its infancy, making government policy support vital. The Trump administration’s withdrawal of over US$1.7 billion in funding for CCUS projects was therefore a severe blow. And yet, the administration also enhanced the 45Q tax credits – the cornerstone of the US incentive mechanism for CCUS projects. Specifically, the credit value for enhanced oil recovery and utilisation were increased to the same level as that for pure sequestration projects. The US remains an attractive location for CCUS investment, but not for large-scale and first-of-a-kind CCUS and DAC projects, which would struggle without alternative revenue pathways beyond the 45Q tax credits.  

Europe and Asia saw stronger regulatory progress. For example, the German government passed regulations to enable CCUS, as well as launching a €6 billion carbon contracts for difference (CCfDs) program to support a range of decarbonisation technologies, including CCUS projects for the first time. Elsewhere, Malaysia introduced CCUS regulations for the first time and awarded its first offshore assessment permit for CO2 storage. 

In terms of major projects, Northern Lights became the first open-access, cross-border carbon storage facility to become operational. A joint venture between Equinor, Shell and TotalEnergies, and with funding support from the Norwegian government, it aims to capture industrial emissions from all over Europe, injecting them into a reservoir 2,600 metres below the seabed of the North Sea. 

We expect positive momentum to continue to build in 2026  

Going forward, while external pressures won’t swiftly dissipate, we expect the EU’s Carbon Border Adjustment Mechanism (CBAM) to propel momentum in 2026 and beyond by incentivising countries to introduce or increase compliance carbon pricing. It can also drive market integration, with a link between EU and UK systems under discussion this year. We expect broader themes of integration and collaboration to continue to develop, for example through the integration of carbon offsets into compliance regimes and the international market under Article 6. These “beyond the voluntary market” applications will provide near-term impetus for offsets while corporate confidence in higher offset quality is rebuilt. 

For CCUS, 2026 should see major final investment decisions (FIDs) for CCUS hubs or associated emitters in locations including the UK, Greece, Italy and the Netherlands. CO2 capture will continue to diversify beyond upstream oil and gas production to other hard-to-abate industrial sectors. However, policy uncertainties and demand-side risks for hubs could cause FIDs or start-ups to be delayed. 

Don’t forget to listen to the full podcast, which covers these and further topics in more detail, or download our longer insights on carbon policy, carbon markets and CCUS (access this report by filling in the form above) in 2026.